When looking for a new investment opportunity, many options are available, all with varying levels of risk. You will want to choose something that has a level of risk you are comfortable with taking that can offer you a decent return on your investment. One such opportunity you may want to consider is investing in the Enterprise Investment Scheme (EIS), which has some excellent benefits for investors. Below is a summary of this type of investment, what it is, and how it can benefit your investment portfolio.
What is The Enterprise Investment Scheme?
The UK government set up the Enterprise Investment Scheme in 1994 to attract investors to businesses with potential risks. It is a long-term investment initiative to get investors to invest their money into young or new companies with high growth potential. There are risks with EIS investments, and to offset these, the government offers investors attractive incentives to participate in this scheme that can make it worthwhile.
What Benefits Do These Investments Offer?
When you invest in the Enterprise Investment Scheme, you can enjoy various benefits which can help offset the risk and make you more comfortable with the investment. You can enjoy income tax relief of up to 30% on your investment, and you can also avoid paying any capital gains tax on profits made from selling your shares. You can also defer previous capital gains and pay this later, and if you experience losses, you can offset these against your earnings to help protect your finances. However, you must follow the rules when choosing this type of investment, and you can see some of these listed below.
The Rules For EIS Investments
There are various rules regarding the Enterprise Investment Scheme, and if a company fails to follow these, it cannot take part in it. The company must be established in the UK and is not allowed to be listed on any stock exchange. They are also not allowed to have more than £15 million in gross assets before issuing shares and more than £16 million after issuing shares. The company must also have fewer than 250 full-time employees or the equivalent.
There are also rules that investors must follow, or they will forfeit the benefits they receive when investing in the Enterprise Investment Scheme. Investors must leave their investment in the company for a minimum of three years and are not allowed to hold more than 30% shares in the company. Investors must also be investing in a company that qualifies for the EIS initiative. If the company does not adhere to the EIS rules, investors can forfeit their entitlement to the incentives the government offers.
Getting Ready To Invest
If this type of investment sounds appealing to you, you will need to speak with a reputable investment firm that can help you with this. Many companies can assist you with an EIS investment and explain all the rules and regulations in detail, so you understand what you are getting into with this type of investment. Choose your EIS with care, and you could end up investing in a company that promises big things and soon takes off, ensuring you receive an excellent return on your investment.